Spending Review - what it really means

20 Oct 2010

The sighs of relief that many have been making over the relative protection of the schools’ budget may prove premature.

For while it is certainly true that schools have fared much better than almost all other parts of the public sector (and much better than universities and FE), not all schools will find their budgets rising in line with inflation.

The reason for that is that the calculation which means that schools will get a ‘real terms’ increase of 0.1% a year includes the Pupil Premium. And since the Pupil Premium will not be divided equally amongst all schools, there will be clear losers overall.

Let’s start by looking at the headline figures (in ‘real terms’ i.e. after adjustment for inflation from 2010-11 to 2014-15):

Total Department for Education Budget= 3% cut

Schools Budget = 0.1% increase

Sure Start = approximately 3% cut (0% in cash terms)

Capital Spending for Schools = 60% cut.

This means that, in order to protect schools, other parts of the education budget (like capital for school buildings) are being cut heavily. These cuts will be deep because, by 2014-15, the schools budget will represent about 68% of the total education budget. In other words, the 3% savings must be found in just 32% of the budget.

We are not yet being told exactly what these other cuts are. But clearly they will affect spending areas such as: safeguarding, Education Maintenance Allowances (which are to end), Connexions, youth programmes, educational quangos, and central departmental spending.

So, returning to the schools budget, does this mean all schools will see their budgets rise in line with (or fractionally above) inflation? The answer has to be ‘no’.

There will be an extra £3.6 billion in the ‘schools budget’. But that includes the additional £2.5 billion for the Pupil Premium. We do not know yet exactly how that premium will be allocated but – clearly – it will be targeted at schools educating children from the poorest homes.

That means that some schools will get more than a 0.1% real terms increase but many schools – particularly those outside inner-city areas – will get a real terms cut to their budgets.

Indeed, these figures raise questions over whether the government can really claim (as the Lib Dem manifesto promised) that the £2.5 billion would be additional money to the schools budget.

A 0.1% real terms increase on the schools budget of £35 billion does not amount to anything remotely near to £2.5 billion.

So the only way the Department for Education can argue that there will be additional injection of this sort is by pointing to the fact that the pay freeze on teachers’ salaries will save schools about £1 billion, with a further £1 billion coming from efficiency savings in schools.

Schools' pay bills, though, will continue to rise even with a pay 'freeze' because of the effect of incremental drift, as teachers move up their pay scale with annual experience increments.

What is clear, however, is that the government is moving to a very different method of funding schools – one which should give schools greater freedom over how they spend their budgets but which will also mean more winners and losers.

That‘s because a whole range of other spending streams are about to be included in the Dedicated Schools Grant. This is the money that goes to schools via local authorities.

Until now there have been several other funding streams for schools, including: one-to-one tuition, the ‘Every Child A Reader’ and similar programmes, extended schools grants, school standards grant, school development grant, specialist schools grant, ethnic minority achievement grant, and National Strategies budgets that were allocated to schools.

In future, it’s likely that many of these will be absorbed into the Dedicated Schools Grant. That will mean the money comes without strings attached and it will help make the basic per pupil funding figure look better, but there will be an element of ‘robbing Peter to pay Paul’.

However, as I said at the start, schools can nevertheless be relieved that they are not taking the hit meted out to universities and FE Colleges.

Teaching in Higher education is effectively being privatised with student fees set to replace government grant. Hence the 40% (£2.9 billion) cut in the higher education budget by 2014-15.

Only subjects deemed of national importance – like science, technology, engineering and maths – are likely to continue to receive government grant for teaching.

Further Education is being cut by 25% (£1.1 billion) by 2014-15. Train To Gain is being axed but there will be a boost to adult apprenticeships of £250 million a year.

<Note: other commentators seem now to have caught up with the inevitability of many schools facing a 'real terms' funding cut. This is partly thanks to the Institute of Fiscal Studies which calculated that the great majority of schools will be losers, although the government disputes their calculations. And, more recently, the Education Secretary, Michael Gove, admitted that some schools will be losers and that the Pupil Premium had come partially from the education budget. >

User Comments

Kathryn Booth - 20 Oct 2010

Forces children

Where is the support for forces children that was promised?
Some children have as many as 13 schools in their Primary career - who is accountable for them with this degree of mobility? The schools that look after them need extra funding to support this vulnerable group of children.

I think it's about time schools had more say over how education budgets are spent, but it will make life much harder for a range of educational suppliers who have been used to tapping into central funds such as Extended Schools or Harnessing Technology - and now will have to convince a head teacher directly of their worth.

Henry Stewart - 21 Oct 2010

Good article, but inner cities are where cuts will fall

Very good piece, Mike. Some schools will certainly be cut, as the pupil premium will favour some over others.

But it is likely to be inner city schools that fare badly. The government has made clear it intends to move funding from "deprived schools in deprived areas" to "deprived schools in affluent areas".

They argue these schools have been neglected. A cynic might suggest funding is being moved from Labour voting inner cities to Tory & Liberal voting areas.

Also the overall funding is only guaranteed for 5-16s funding. The Spending Review clearly states (p 41) plans to "reduce 16-19s unit costs".

So sixth form funding will be cut.

Lynn Eldrett - 24 Oct 2010

Education budgets

Hi, thanks for this piece which was the clearest advice I have read. It is a mistake to say teacher's pay will be frozen though, as even without an inflationary rise teachers go up first through the main pay scale every year, then every other year onto upper pay scale. These rises will have to be found from making cuts in premises and supplies budgets if we have a 0 budget increase. Many schools are looking at deficit budgets and LAs will struggle to meet the demand for cash advances.
MB: fair point,although there will be no above-inflation pay rise there will - as you say - be incremental drift, which affects school budgets.

Martin Doidge - 12 Nov 2010

Teachers Pay

Don't forget that teachers pay increases in September of each year but schools are funded on a fiscal year basis so nearly half of the cost of the September 2.3% award for teachers has to be funded from the 2011/12 fiscal year plus the incremental drift you mention. Compounding that there is a real slowdown in staff turnover due to roles in local authorities and similar education-focussed organisations disappearing due to the CSR. Schools have traditionally relied on turnover to move experienced but expensive teachers on and allow newly qualified but cheaper teachers into schools to ofset the impact of incremental drift.
In my school I estimate that teaching staff costs will rise by 3% next year (without any change in headcount) due to the combination of these factors. Combined with the effective freeze in funding that can only mean one thing - less teachers...

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